GAIL RE-FLOATS $7 BIL­LION TEN­DER TO HIRE LNG SHIPS

Resource Digest - - EXPANSION -

State gas util­ity GAIL In­dia has re-in­vited bids to hire nine newly-built LNG ships on mod­i­fied terms that al­low In­dian ship­yards to pick up to 13 per cent stake in three of th­ese car­ri­ers that ship­builders have to make in the coun­try.

Af­ter post­pon­ing the dead­line thrice, GAIL had in Fe­bru­ary scrapped the $7 bil­lion ten­der to hire nine LNG car­ri­ers to ferry gas from the US, with a caveat that three of them be made in In­dia. At that time no for­eign ship­yard was will­ing to share LNG ship­build­ing tech­nol­ogy.

Ne­go­ti­a­tions that fol­lowed saw Korean ship­builders Sam­sung Heavy In­dus­tries, Hyundai Heavy In­dus­tries, Dae­woo Ship­build­ing & Marine Engi­neer­ing agree­ing to co­op­er­ate with Cochin Ship­yard, L&T Ship­build­ing and Pi­pa­pav Ship­yard re­spec­tively.

Fol­low­ing this, GAIL re-floated the ten­der for char­ter hir­ing of nine ships quoted in three lots of three ships each. One ship in each lot is be built at an In­dian ship­yard.

The ten­der doc­u­ment pro­vides for In­dian ship­yard tak­ing 5 per cent to 13 per cent in the liq­ue­fied nat­u­ral gas (LNG) car­rier that it will build. This con­di­tion was not there in the orig­i­nal ten­der floated last year.

Also, GAIL has a right to take up to 10 per cent eq­uity stake in any or all of the nine ships. Ship­ping Cor­po­ra­tion of In­dia (SCI), which is to op­er­ate the car­ri­ers, will have a right to 26 per cent in­ter­est, ac­cord­ing to the doc­u­ment.

GAIL and SCI had last year signed an agree­ment wherein the state-owned ship­ping com­pany has the step-in right to take at least a 26 per cent stake in each of the nine LNG car­ri­ers hired by GAIL.

GAIL plans to time char­ter, or hire, the car­ri­ers for 18 years from fleet own­ers. Over­seas ship­yards have been given time till May 31, 2019 to de­liver their ships while those built at In­dian ship­yards are to be de­liv­ered be­tween July 1, 2022 and June 30, 2023, the ten­der doc­u­ment said.

GAIL had in Au­gust last year floated a global ten­der to char­ter nine newly-built ships for trans­porta­tion of up to 5.8 mil­lion tons per an­num of LNG from the US.

The ten­der, how­ever, re­quired bid­ders to build one-third of the ships in In­dia, a con­di­tion that found no tak­ers.

It first post­poned the last date of bid­ding from Oc­to­ber 30 to De­cem­ber 4, then to Jan­uary 6 and Fe­bru­ary 17. It then can­celled the ten­der. The ten­der was re­floated af­ter Korean ship­yards en­tered into pacts with In­dian ship­builders. The tech­ni­cal col­lab­o­ra­tions were nec­es­sary be­cause none of the In­dian yards have built LNG car­ri­ers be­fore.

GAIL said it has a 20-year gas sales and pur­chase agree­ment (GSPA) with Sabine Pass Liq­ue­fac­tion Llc, a unit of Che­niere En­ergy Part­ners LP in the US, for 3.5 mil­lion tonnes per an­num of LNG. Also it has a ter­mi­nal ser­vice agree­ment for 2.3 mil­lion tons a year LNG liq­ue­fac­tion ca­pac­ity with Do­min­ion Cove Point LNG in the US. In ad­di­tion, it has a 20-year LNG sup­ply con­tract for 2.5 mil­lion tons with Gazprom Mar­ket­ing and Trad­ing Ltd.

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